One of the most alarming trends we’ve seen in the past few years are the short tenures of VP of Sales at early stage VC backed startups. Recent trends show that average tenures have decreased from 26 months to 19 months from 2010 until 2017 with an average decline of 7% in the last 3 years.
Anecdotally, we believe the true mean for the cohort of early stage startups is likely even shorter than 19 months.
With the anticipated tightening of early stage VC funding, budgets should be further restricted on big ticket executive hiring. And the opportunity cost of mis-hiring or pre-maturely hiring a VP of Sales can be even more damaging at the formation stages of a sales team.
While there are certainly cases where startups successfully hired and retained a VP of Sales for many years, this is far from the norm. In this article, we’ll breakdown what we’re seeing from the trenches and provide some thoughts on how to navigate this important inflection point for early stage startup founders.
Let’s set the stage…here’s what we’re seeing time and time again:
With the first institutional round of funding (sometimes even before that), founders look to hire a VP of Sales (ie. Head of Sales) to take over revenue responsibilities.
The appeal of this approach is understandable. Founders build companies to create amazing products and services, not to make cold calls and stress about revenue targets. Sales is hard and often times intimidating for product-first founders so it’s understandable that they would spend your first big check on a rockstar VP of Sales who has done it before.
The stakes are extremely high in this hire.
First, startups go through a long, arduous process of executive hiring — a process that can take 6-9 months before seeing real returns. It takes 3-6 months to hire followed by a 3 month ramp. The entire team invests countless hours interviewing candidates, and is led to believe this person can help you achieve the revenue goal needed to get that next round of funding. And not to mention, you’ll end up paying an exorbitant amount to hire this person (including the fee paid to the executive search firm).
So why is hiring a successful VP of Sales so difficult for startups?
1) You probably don’t know what you want.
Or at least to the level of precision you should for this risky of a hire. Most inexperienced founders pursue what they perceive as the “safe bet”. The board may intro you a “rockstar” who was a BigCo SaaS veteran of 7 years. But the role itself is so broad if you look at what a VP of Sales is tasked to do at a startup.
Your ideal customer profile, product usage case, and revenue strategy could change very quickly so the success of this hire is both a bet on the candidate and a bet on you knowing what want.
For example, you could hire a VP of Sales who comes with 5+ years of scaling high velocity inside sales organizations with the immediate goal of them hiring 4 AE’s selling into SMB’s. But 6 months later, you could realize that your ACV is too low and your burning too much cash vs. new bookings and you really need to take the product upmarket and hire someone who can build an enterprise field sales organization.
2) Their compensation level increases burn, and comes with high expectations and opportunity cost.
Most VP of Sales are looking for ballpark $250-$350K OTE in NYC with 0.5-3.0% equity. This can represent a significant piece of the round you just raised and comes with high expectations for internal hires that have worked tirelessly at much lower compensation levels.
If they’re not selling, then hiring a VP of Sales is almost like hiring a new co-founder at likely the highest earnings level in the company. The opportunity cost could be 2 FTE engineers, or 2-4 sales hires who represent 2-4x the velocity of sales activities (ie. at-bat’s). These at-bats may become painfully more important to you after a few months vs. the strategic thinking of your VP of sales.
3) BigCo experience doesn’t hustle, and Startup experience doesn’t scale.
It takes a unique individual to have longevity as a VP of Sales at a startup. The skills required to succeed at different stages are so different that rarely can you find someone who has been successful leading a sales team through different growth periods. We’ll call the two common mis-hires profiles “BigCo VP” and “startup sales leader” (individual contributor).
The BigCo VP tends to struggle with adjusting to the fast tempo of a startup. They tend to be more used to receiving clear directives as middle management in a larger organization, sales resources, and established processes that were created by others around them. They could adjust to the workload in the short term but could become frustrated and burn out when they run into major hurdles.
On the other hand, the startup sales leader tend to lack the BigCo analytical problem solving and operational process design skills. Most of their experience has been implementing things fast that work reasonably well and lack the muscle memory of high rigor thinking you typically see in the Creator vs. Refiner dynamics in a larger corporation. The startup concept of do things that don’t scale at first also breaks down quickly when startup sales leaders are forced to design for large teams and create complex change management plans.
The experience differences between a head of sales at ARR: $0-1m, $1-10m, $10-30m,$30-100m+ are real. It’s hard to find someone who can break through the tiers similar to founder-CEOs who are able to take companies public.
So what are some alternative things you can do?
Hire more sales reps and run sales yourself.
You’re going to have to keep selling for now — and it’s not a bad thing. Your sales and product feedback loop will be faster, and you’ll develop the empathy and credibility with your sales team to inspire and motivate them through challenging times. In startup sales, it’s often better during the early stages to hire for immediate results to get to the next milestone: revenue, demos, meetings set, cold calls made, and optimize for learning instead of building playbooks that quickly become obsolete as your environment changes. All that comes later after you’ve proven a repeatable model with supporting evidence that it can truly scale.
There’s nothing more motivating for your sales reps to being in the trenches with the passionate co-founder. You can hire someone who may know more about sales but it’s unlikely you’ll hire someone who knows and cares more about your product than you will.
Promote from within.
Figure out first if what you’re lacking is something that needs to be exported from the outside world or just that you need someone to focus on strategy vs. tactics. If it’s the latter, look around you to see if anyone on the current team can step up into the role. The challenge isn’t the promoting part but also offering this person outside training, and mentorship in the new role. In general, early stage startups should re-evaluate current organizational design and the skills of their existing employees before jumping to conclusion of needing to upgrade through hiring an outside gun.
Hire a strategic consultant or part-time VP of Sales.
A more popular approach we’ve seen in the last few years is going with an independent consultant or advisory firm that specializes in different parts of the revenue funnel or industry/sales strategy. Even if you pay a lot more per hour, it’s worth getting a subject matter expert who can crank out the exact project you need and has broader perspective from having implemented the strategy in different environments.
Contact us for list of recommended vendors.
But if you still plan on hiring a VP of Sales, here are some thoughts:
1. SCOPING:
Sit down as an executive team and determine what you need in the next few quarters. Use this free template to prioritize what you’re looking for and try to whittle your wish list down to a few core focus areas and hire the best candidate who can achieve these objectives. Make sure key stakeholders hold the same vision of what this person will be responsible for before you start the search. Most importantly, like any well designed startup experiment, make sure you know how you would measure the success.
Don’t over-scope the role. Even if you are hiring a VP of Sales you think can do it all, make their first 90 days very focused and give them narrow goals they can achieve. Handing over the reins on day 1 does not set them up to succeed and they are more likely to drift from your vision.
Design for their strengths & weaknesses. Don’t chase the unicorn hire but get the A player with strengths that align with core objectives you have for next 12 months. And be okay with potentially hiring another person or part-time consultant who are complementary to their weaknesses. But the caveat here is make sure you minimize redundancy in responsibilities so you don’t get too many cooks in the kitchen.
2. HIRING:
Check for culture and operational tempo. Sales culture at every startup is different and a lot of times a function of the resources, product industry, customer types, and founder personalities. If your candidate came from a BigCo, make sure you evaluate whether they can move fast, pick up the phone when needed, and sell without logos & case studies. If the culture and tempo doesn’t match, that could be a bigger issue than relevant previous experience.
Run exhaustive reference checks. Besides asking the candidate to supply references, also check your team’s network for potential intros to former colleagues and direct reports. You’re not necessarily looking for positive or negative things, you’re looking for a fit with your culture and your needs today.
Date first and hire slow. It’s tempting, but don’t simply jump in to a hiring decision without trying to work with them through a few working sessions to discuss real problems your business is facing. Test different perspectives: invite them out for drinks or dinner, have them spend time with their future direct reports, have them see your product and ask them tough questions, sometimes the sames ones over and over to check for consistency in answers and behavior. The caveat here is that it is a very competitive talent market, so once you feel like you know the bet you’re making, don’t drag out the process just for the sake of it.
Don’t overpay on cash. If you’re stretching the budget to make it work, it’s probably not a good idea and also the individual probably isn’t ready to be a true head of sales at a startup. The equity piece should be a real incentive to them and you should be willing to provide that in exchange for cash for someone who you are expecting to drastically impact the business.
3. INTEGRATION:
Set expectations in absolute terms. Despite how strong this candidate may be to your status quo, make sure you set the bar in absolute terms. Applauding a new executive that makes you “not suck” does not build confidence with the rest of the team. If you need to benchmark excellence, network and learn from top sales leaders that you can’t recruit today.
Prescribe integration plan. You know your organization and people better than your new VP. Give them a high level plan of how to spend their first 30 days, who they should meet and build rapport with, and what they can do out of the gates to build the credibility with the team so they will support them.
Try a stepwise integration approach. Sometimes, if you have a candidate with strong alignment with immediate needs but may not be a turn-key executive hire, you may be better off bringing them with reduced responsibilities and title (ex. Director of Sales Development to focus only on top of funnel). This will focus them, alleviate pressure from your existing sales team members, and not have to demote them if they can’t do one thing well. Some startups also bring VP of Sales on as consultants first to give both parties a more extended trial period. Regardless of what approach you take, make sure you are having upfront conversations about concerns and how you are thinking about these trial periods.
Take ownership for their failures. If they end up failing, it’s probably your fault more than theirs. Don’t just try to replace with another hire without examining the root cause. So re-think the environmental factors you’ve put them in that is causing their challenges: product-market fit, culture / operational tempo, autonomy, poorly defined role, bad onboarding and try to avoid the same mistake.
Parting thoughts:
Hiring a VP of Sales early could very well be the right approach for your startup but the decision should be a carefully deliberated and in our opinion, a last resort after ruling out easier interim solutions to achieve your goals.
If you decide to hire, I recommend you read the chapter titled “Preparing To Fire An Executive” in the book The Hard Thing About Hard Things by Ben Horowitz. It’s almost inevitable that startup founders will have to part ways with an executive at some point so knowing the pitfalls is a good first step.